The decision was announced in the Commons by junior defence minister Ivor Capling who said further payments are to be made to pensioners who lost out from the effects of the error over a number of years.
They are to be paid compound interest at the rate of the Retail Price Index plus 2% of the tax wrongly deducted, less compensation already paid by the Inland Revenue.
Ex-gratia compensation calculated in the same way will be paid to those who suffered a related error of delay in the payment of benefits.
Caplin said the MoD ‘deeply regret the errors’ and praised the retired officers who forced the MoD to accept the justice of their case.
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